Chinese influence incubator Ruhnn Holdings is facing class action lawsuits filed by more than 10 US law firms for possible violations of disclosure rules related to its initial public offering in April.

Why it matters: Ruhnn joins a growing list of Chinese tech firms including Alibaba, New Oriental, and fintech platform Yirendai that have faced fraud allegations by investors, degrading investor confidence at a time when Chinese capital markets are increasingly tight.

  • China’s key opinion leader (KOL) and blogger industry is very competitive. There are at least 200 platforms that manage KOLs, according to data from marketing platform Parklu.
  • Critics say Ruhnn is over-reliant on a small handful of top KOLs. One particular influencer, Zhang Dayi, has brought in about half of its total sales for nearly three years.

Details: The lawsuits accused Ruhnn of securities fraud for failing to disclose important information about the company, resulting in investor losses.

  • The primary accusation is the company’s failure disclose that the number of Ruhnn’s online stores had declined by nearly 40% and the number of Ruhnn’s full-service KOLs had declined by nearly 44% at the time of its IPO, one of the law firms representing investors, Bernstein Liebhard, said in a statement.
  • These two figures serves as key metrics to measure the performance of the company, which generates its revenue from e-commerce and KOL management services.
  • Ruhnn’s stock priced dropped 16.2% from its Oct. 7 price of $7.03 to $5.89 as of market close Friday, more than halving its IPO share price of $12.50.
  • Ruhnn told Chinese media that all of its disclosures are in compliance with corresponding rules, and that the company’s US lawyer is helping them to handle the issue. “Daily operation of the company is normal and unaffected,” local media reports cited the source as saying.

Briefing: China’s top influencer firm Ruhnn stock drops 37% after US IPO

Context: Much like their US counterparts, Chinese brands are turning to influencers to market products and services. But while US internet personalities draw compensation through social media platforms, Chinese influencers known as key opinion leaders (KOLs) monetize through their own e-commerce businesses. This structure gave rise to KOL management platforms which help with managing each influencer’s e-commerce store, social media marketing, and business decisions.

  • Feng Min, founder of Ruhnn, owns a 29.3% stake while Alibaba-backed Taobao China Holdings has a 8.56% stake in the company, according to the prospectus.
  • Ruhnn listed on China’s OTC desk, the National Equities Exchange and Quotations, in 2016 but delisted because of its continued losses.

Emma Lee (Li Xin) was TechNode's e-commerce and new retail reporter until June 2022, when she moved to Sixth Tone to cover technology and consumption. Get in touch with her via or Twitter.

Leave a comment

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.